Once again, Q3 remained incredibly busy as well as challenging for multi-industry supply chain teams, with global trade and tariff developments and high levels of uncertainty and incidents of supply chain disruption occupying much of multi-industry supply chain developments.

Global Supply Chain Activity Levels

Global manufacturing and supply chain activity reached a two-year low by the end of September. The broader J.P. Morgan Global Manufacturing PMI reflected a 22-month low in activity levels, with the average PMI having now slipped 2 full percentage points from the beginning of 2018.

Developed Economies, the prime engine of prior growth again dipped in Q3 and now reflects two quarters of slowdown in momentum. Of the four major Developed regions that we monitor (United States, Eurozone, Japan, Taiwan) all reflected reduced activity levels with the exception of the United States, but the U.S. PMI declined a significant 1.5 percentage points from August to September. As we went to publishing today, the Manufacturing ISM® Report On Business dipped another 2.1 percentage points from September to October, which mutes any Q3 growth momentum. Likely, this reflects building impacts of tariffs imposed by the Trump Administration along with counter tariffs from other countries.

Our overall tracking of Developing Regions indices at the end of Q3-2018 reflects a more concerning picture relative to noticeable impacts from ongoing trade and tariff actions that include global currency shifts. Among the five Developing regions we track (China, India, Indonesia, Mexico, Vietnam) the average PMI rating of Q3 declined 0.3 percentage points from that of the prior quarter and is now tracking 3 percentage points lower than the beginning of 2018. The region with the highest activity levels was Vietnam while the Caixen China Manufacturing PMI reached the neutral 50 level by September, just short of contraction.

Dominant Themes

A review of Q3 events leaves little doubt that heightened trade and tariff tensions and supply network disruption were the dominant agenda. There was some positive news with the announcement of an agreement among Canada, Mexico and the United States on a new trade pact to replace the former NAFTA agreement. On the concerning end was more escalating tariff and trade tension among China and the United States which is now becoming much more apparent to multi-industry businesses and their supply and demand networks.

Multi-industry supply chain disruption was reflected in two major catastrophic hurricanes impacting eastern regions of the United States while record-breaking typhoons rolled across the Indian Ocean and coastal China. With Q4 serving as a critical revenue and profit focused quarter for many industries, agricultural, meat, consumer electronics and high-tech focused supply networks will likely be involved in ongoing supply risk mitigation plans and actions.

A number of specific business and industry supply chains remained under the business media looking glass, including the ongoing manufacturing and supply chain challenges related to electric automaker Tesla and the company’s ramp-up of volume manufacturing and commercial aircraft manufacturers Airbus and Boeing, both being visibly impacted by component shortages, especially the delivery of aircraft engines required supply of new aircraft engines. During the quarter, Boeing at one point had upwards of 100 semi-finished single-aisle aircraft parked on factory adjacent runways waiting for aircraft engine deliveries.

As we went to press for our Q3-2018 Newsletter, we were able to share with readers that in early 2019 we will be introducing a new Sustaining level thought leadership sponsor for the Supply Chain Matters blog that will broaden our thought leadership into a different dimension of extended supply chain network agility and decision-making needs involving extended consumer focused supply chain networks.

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